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Excess insurer prevails in wrongful death coverage dispute

Excess insurer prevails in wrongful death coverage dispute

Cincinnati Insurance Co. has prevailed over a Fairfax Financial Holding Ltd. unit in a coverage dispute involving a worker’s death.

In July 2012, Nacogdoches, New Mexico-based Bingham Construction Co. entered into a construction agreement with Albuquerque, New Mexico-based High Desert Roofing Inc. to perform roofing services at a Farmington, New Mexico, tractor supply store, according to Monday’s ruling by the 10th U.S. Circuit Court of Appeals in Denver in First Mercury Insurance Co. v. Cincinnati Insurance Co.

The subcontract agreement required High Desert to obtain insurance coverage and to add Bingham as an additional insured on the policy. High Desert obtained a policy from Frist Mercury, a unit of Toronto-based Fairfax Financial Holding Ltd.

The First Mercury policy included an endorsement that provided the policy was primary over any other insurance when required by a written contract, according to the ruling.

Bingham obtained its own general commercial liability insurance from Fairfield, Ohio-based Cincinnati.

In September 2012, High Desert employee Jose Corona fell through a hole in the tractor supply store’s vestibule attic, landing on the concrete 20 feet below. He died shortly afterwards.

The hole was allegedly cut into the steel flooring of the vestibule attic by a Bingham employee and subsequently covered with two pieces of ill-fitting plywood.

The hole was not marked or otherwise identified. Mr. Corona was not wearing fall protection. High Desert’s president said his company knew of the hole and had asked Mr. Corona to examine it.

Following Mr. Corona’s death, a wrongful death suit was filed against Bingham. The lawsuit was eventually settled for $4.2 million, with First Mercury paying its $1 million policy limit and Cincinnati paying the remaining $3.2 million.

First Mercury then filed suit in U.S. District Court in Albuquerque, seeking a declaration it had no duty to defend or indemnify Bingham and that Cincinnati had an obligation to reimburse First Mercury for the indemnification and defense costs.

The District Court ruled First Mercury had a duty to defend and indemnify Bingham and that Cincinnati had no obligation to reimburse any part of the settlement amount or the defense costs.

A three-judge appellate panel unanimously affirmed the lower court’s ruling. As an excess insurer, Cincinnati “is required to pay the amount of the settlement that exceeds the coverage limit of the First Mercury Policy,” the ruling stated.

“Because the settlement was amount was $4.2 million and the First Mercury Policy limit was $1 million, Cincinnati was required to pay $3.2 million. Cincinnati has paid this amount and thus has no obligation to reimburse First Mercury for any of the indemnification costs,” nor the defense costs, said the ruling, in affirming the lower court’s judgment.


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